MEMC Misses Street Forecast

MEMC Electronic Materials reported a loss in the fourth quarter, while analysts had been expecting break-even numbers.
By Eric Rosenbaum ,

SAINT Peters, MO. (

TheStreet

) --

MEMC Electronic Materials

(WFR)

reported a loss of 3 cents per share, versus an analyst estimate of a break-even quarter for the company.

Shares of MEMC were down slightly in the after-hours session on Wednesday. MEMC showed sequential improvement from the third quarter, even though the improvements were still well behind the pace of sales and profits from the fourth quarter of 2008.

Solar investors have been looking for a big fourth quarter from solar companies. While MEMC made considerable progress from its recent trough, it may not be clear until MEMC hosts its investor day in New York City on Thursday if it can provide analysts and investors with the confidence for MEMC shares to rally.

GT Solar

( SOLR) also reported on Wednesday, and while shares in the solar equipment maker were up 6%, analysts who cover the company said the

GT Solar earnings sent mixed signals about the solar outlook.

Christopher Blansett, an analyst with J.P. Morgan, is looking for

MEMC gross margin improvement to the level of 30% or higher -- though he didn't expect it all to happen in one quarter. MEMC had fallen as low as 6.6% gross margins in the third quarter of 2009, after production problems at its plant in Pasadena, Calif.

MEMC made some progress in gross margins in the fourth quarter, with a gross margin recovery from 6.6% to 14.7%. Still, the fourth quarter of 2008 had gross margins above 45%. What's more, since the SunEdison business acquired by MEMC is expected to be a lower gross margin business line, there will be more pressure on MEMC to outperform on growth margins in its existing solar segment, where gross margins had once been as high as 65%.

MEMC's fourth-quarter net loss was $7.1 million, compared with a net income of $70.3 million, or 31 cents per share, a year ago.

Net sales fell 17% to $352.9 million during the fourth quarter, but were up 14% sequentially from the third quarter.

The big story this earnings season for MEMC is its acquisition of formerly privately held SunEdison. The earnings report gave investors the first peek at SunEdison financials -- though analysts hope much more will be revealed on the conference call Wednesday evening and during the investor day on Thursday.

Net sales for SunEdison during the period from November 20 through December 31 were $3.8 million. Gross profit was $1.1 million, or 28.9% of net sales. Operating expenses for the period were $11.5 million, and operating loss for the period was $10.4 million. During the period, 13 megawatts were installed and interconnected, with the majority of the associated revenue and profits to be recognized in future periods, MEMC said in its earnings release.

The MEMC fourth-quarter results included transaction expenses of $2.5 million for the acquisition of SunEdison.

-- Reported by Eric Rosenbaum in New York.

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